Chris Skinner has been blogging, about banking and technology, speaking at conferences, running the Financial Services Club, in London and other cities, consulting with bankers and getting to know just about everybody innovating in banking in the US, Europe and a number of more remote spots in the world.
He has pulled it all together provocatively in his book Digital Bank — strategies to launch or become a digital bank.
Warning — becoming a digital bank won’t be easy.
Traditional banks are organized around money in branches, Skinner explains. Their thinking, their technology, their incentive systems, their knowledge about customers — are all structured around branches and product lines. Cell center systems were layered on top, with the result that customer service reps sometimes needed six open windows to see a customer’s business with the bank.
To become digital, banks have to focus on electronic platforms and data as their core and branches as secondary. To get to an integrated electronic platform, Skinner says early in the book, banks need to replace their old core systems. At another point, however, he writes that there are technology workarounds, like middleware, and that the problem is the bank organization, not the technology. Indeed IBM in the UK is working on a series of projects with a major bank to make its legacy systems meet modern demands and Zafin wraps core systems with modern functionality. (See my story links on the left)
Banks are shutting down branches — Europe closed 20,000 in the last four years, and thousands have been closed in the U.S. Skinner predicts that banks will go from 1 branch per 20,000 customers now to 1 branch per 250,000 customers. Banks will move to electronic channels where a transaction is much cheaper than one performed by a teller. He also makes the point that the majority of today’s population now are digital natives — they grew up with computers and more to the point, smartphones. And with developed country users replacing mobile phones every 18 months, smartphones have become common in developing nations as well.
At times he seems a little too bank centric, suggesting that your bank will know you looked at LCD TVs on Google and will ping you with a discount offer as your walk past an electronics store the next day. More likely Google will make you the offer — or you’ll go to read a review on Amazon and make a purchase directly, perhaps using PayPal, not your bank.
Underlying Skinner’s writing, and a lot of advocacy of more comprehensive customer data for the 360-degree view of customers, is unexamined consumerism — banks and retailers want to know more about us so they can sell us more stuff. There are some bright exceptions — Simple, Moven and SmartyPig which help users save money. But if banks or other firms use geolocation and data from my searches to ping me with offers as I walk down a high street or through a mall, I will be hitting the App Store for a way to stop them, or I will just turn off my mobile. Assuming that I remember to take it with me.